Tesla has reportedly canceled plans for its $25,000 electric car. The future of Elon Musk’s company looks blurrier than ever.
Tesla’s CEO Elon Musk scrapped plans for an affordable electric car, a long-awaited vehicle whose name was speculated to be “Model 2”. Reuters reported the news citing 4 people familiar with the matter. Musk accused Reuters of lying in a tweet on his social media platform X (formerly known as Twitter).
The Model 2 was a long-time dream of Musk and Tesla fans. First announced in 2018, Musk bloated about an affordable electric vehicle for years, saying it was “his dream” to build one.
Speculation surrounding the Model 2, often inflated by Musk himself, put its alleged starting price at $25,000. Tesla’s current cheapest model retails at $39,000 in the United States.
According to Reuters-reviewed sources and employees’ messages, Musk canceled plans for the Model 2 as late as March 2024. “Elon’s directive is to go all in on robotaxi,” one of the sources told Reuters.
In a later tweet, Musk confirmed the company will announce a self-driving taxi on April 8th. Musk said the self-driving software on this new model would be so safe that people could “go to sleep” behind the wheel.
Robotaxis received increased attention from carmakers and software engineers in recent months. Alphabet’s Waymo, a robotaxi maker, extended its operations in four major US cities while improving its self-driving software.
Lagging behind
With the Model 2’s cancelation, the future of Tesla looks grimmer than it already did.
Tesla’s terrible business decisions in the past few years, combined with increased competition in the EV sector and weak demand in the US and Europe, are putting Musk’s company into boiling waters.
Chinese carmakers cranked up their production efforts in 2023, making China the world’s largest EV producer. Chinese electric cars retail at much cheaper prices than Tesla’s.
But competition remains fierce outside of China too. US, Japanese, and European carmakers all released their EV responses to Tesla’s Model 3 in the past few years. Despite the aggressive offer, the demand for EVs still remains weak against hybrid cars, adding to Tesla’s many problems.
And Tesla’s response was as weak as it could be. The recently released Cybertruck is a complete production and financial nightmare. The car is way too difficult to make, and the customer base is way too small for the Cybertruck to be anything but a smoking failure. Musk himself admitted that “We dug our own grave with the Cybertruck”.
Tesla’s roadmap for the future is blurry and uncertain. The market share it used to have is quickly eroding away. And getting it back will not be as easy as it was a decade ago.
